Can I take my Income Statement to the grocery store?

​My P&L shows I made a profit last year and I’m on track again this year… 
​My question is… can I take it to Publix for groceries?  (asking for a friend)
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If you’re P&L looks good, but your bank account balance is tight at the end of the week after you make payroll and pay your bills… You’re not alone. That’s all too common for small and mid-market companies.
 
Many small business owners ask me why?...
 What’s the disconnect between my accounting reports and my money?
 
Fair question.
 
The answer is time. Yes, your P&L is reporting on a date range but most of the time, that date range is rather broad such as “This Quarter” or “This Year to Date”, etc. In fact, it’s super rare to find a [accrual based] P&L that is reporting accurately if the date range is one month or less because it’s usually not kept up to date and reconciled quickly enough in most busy bookkeeping departments.
 
So, the problem is, broad based date ranges don’t reflect the “real time” movement of money in and out of your bank account(s) daily or weekly within the date range of the report and knowing how much money is going to be in the bank at least weekly is critical if you are going to have a chance of being on top of your income, your bills and your business in general.
 
Additionally, if you have a fleet of vehicles, either on bank notes or leased, those monthly payments are most likely NOT coming out of your P&L because those payments are considered “Balance Sheet” items because they impact  your assets and liabilities. But they do represent real cash coming out of your account every month!
 
Likewise, simply checking your bank balance (even the balance reporting in QuickBooks®) isn’t good enough either because your bank balance a “snap shot”… just a fleeting moment in time that will probably change before you finish your lunch from Chic-fil-A today. So it doesn’t take into consideration that you have payroll in 2 days and about 8 vendor invoices coming due this week.
 
So… how can you get an accurate idea of how much you can pay out for payroll and payables this week and still have cash will be in the bank at 5pm on Friday without going through an annoying and tedious 45 minute exercise with your bookkeeper to look (again) at “what’s coming in this week and what invoices do we have to pay”?
 
That gets pretty old doesn’t it…?
 
Here’s how. You have your accountant set up a “Cash Forecasting System”. Just a simple excel spreadsheet that your bookkeeper can keep updated with just a few minutes per week of effort that will give you a pretty good idea of how much money will be left in the bank at the end of the week… and at the end of the next several weeks!
 
Once you do that, you will wonder how you ever got along without it because not only will it save you a ton of time and guess work, it will tell you when you’re going to be tight on cash, usually with several weeks’ notice… which is a whole lot better than getting punched in the nose at 3pm on a Friday afternoon.
 
So, if you want to gain that type of control over your finances and get rid of a whole bunch of stress… go ahead and close Linkedin and give your CPA a call and ask them to set you up a Cash-Flow Forecast system.. Your life will never be the same… Promise!
 
 
S.E.P.  Sample Cash Management Tool: